ABC MARINE P.LTD,MUMBAI vs. ITO WD 1(1)(4), MUMBAI

The sole ground raised by the assessee is with regard to penalty levied u/s.221(1) of the Act.

The facts in concise are that assessee, a company incorporated under the Companies Act, 1956, is providing services of manpower and hiring of cranes. The assessee filed its return of income declaring total income of Rs.1,06,99,270/-, which was processed u/s.143(1) of the I.T.Act. Subsequently, the Assessing Officer issued notice u/s.221(1) r.w.s.140A of the Act. It was submitted by the assessee that due to technical problem and lack of funds, the self-assessment tax could not be paid. However, the Assessing Officer being not convinced with the reply of the assessee, levied penalty of Rs.3,41,956/- @ 20% on self- assessment tax payable u/s.221(1) of the Act. The assessee preferred appeal before the CIT(A) and the CIT(A) reduced the penalty to 10% as against the 20% of penalty levied by the Assessing Officer. Now, the assessee is in further appeal before the Tribunal.

The learned counsel for the assessee reiterated the submissions made before the lower authorities. The learned counsel submits that with a short delay the self-assessment tax was paid alongwith interest, therefore, there is no justification in levying penalty u/s 221(1) of the Act.

The ld. DR supports the order of CIT(A) in sustaining the penalty to the extent of 10%. He submits that the CIT(A)’s order is reasonable and should be confirmed.

We have heard the rival submissions, perused the orders of the authorities below. It is the submission of the assessee that assessee could not pay the self-assessment tax within the due date for filing of return due to shortage of funds. It was submitted that with a short delay assessee has paid self-assessment tax alongwith interest, therefore, no penalty should be levied. On a perusal of the penalty order and CIT(A)’s order, we find that assessee has not given any sufficient reason for non- payment of self-assessment tax before due date of filing of return. The CIT(A) sustained the penalty to the extent of 10% observing as under :- “4. The facts of the case, the stand taken by the A.O in the assessment order and the contentions raised by the learned authorized representative of the appellant company during the appellate proceedings as well as the written submissions made are considered. It is an admitted fact that the appellant has neither paid the self assessment tax within the due date of filing the return of income u/s 139(1) of the Act nor at the time of furnishing the return of income. Clearly there is a failure on the part of the appellant in complying with the provisions of section 140A of the Act. This is a case where, prima facie, penalty provisions u/s 221(1) of the Act are attracted. 4.1 As regards the reasonable cause, the appellant has relied upon a contention that its bank accounts did not have adequate credit balance at the time of furnishing of the return of income. The appellant has also contended that it was required to meet its business obligations as on 16.09.2011 by making the payments to one M/s. Heena Cargo Movers. However, the explanation and 3 justifications submitted by the appellant fall far short of the requirements of a reasonable cause that is envisaged in the Income-tax Act. Prioritizing the business payments over the self assessment tax payment is not an adequate justification. The appellant was duty bound to make the payment of self assessment tax at the time of filing of the return of income, within the due date u/s 139(1) of the Act, so as to avoid penal consequences. In principle, the levy of penalty u/s 221(1) is found to be justified. However, considering the delay of less than a month, I hereby direct the AO to reduce the penalty to 10% of the unpaid self assessment tax at the time of filing of the return of income, as against the 20% of penalty levied by the AO. Accordingly, the penalty u/s 221(1) is reduced to Rs.1,72,405/- as against the penalty of Rs.3,41,956/- levied by the AO.”

On going through the order of CIT(A), we do not find any valid reason to interfere with the findings of CIT(A) that penalty provisions of Sec.221(1) of the Act are attracted. However, taking the totality of facts and circumstances, we reduce the penalty to 5% as against 10% confirmed by the CIT(A).